UK mortgage approvals rise to highest since Dec 2009 - BBA
* UK mortgage approvals rise by more than 25 pct over year
* Unsecured consumer lending returns to annual growth
* Business lending falls, small business lending stable
By David Milliken
LONDON, Sept 24 (Reuters) - British banks approved the highest number of mortgages since December 2009 last month, industry data showed on Tuesday, raising the chances of further house price rises to come as the economy gathers speed.
Figures from mortgage lender Halifax already point to house prices rising at an annual rate of more than 5 percent, above the rate considered sustainable by property industry body the Royal Institute of Chartered Surveyors and raising concerns about the risk of a new boom-bust cycle.
The British Bankers' Association (BBA) said on Tuesday that its members approved 38,228 mortgages in August, up from 37,428 in July and more than a quarter higher than in August last year. The figures act as a leading indicator for more comprehensive BoE data due on Sept. 30.
"Housing market activity is now really stepping up a gear, supported by markedly strengthening consumer confidence and elevated employment, and fuelled by the Funding for Lending Scheme (FLS) and the Help to Buy initiative," said Howard Archer, chief UK economist for IHS Global Insight.
The government launched the FLS last year and Help to Buy in March to help home buyers. The FLS has lowered banks' finance costs, leading to cheaper mortgages, while Help to Buy assists home buyers struggling to find a large deposit for house purchase.
The BBA reported that net mortgage lending remained muted, however, with the total amount outstanding on British mortgages dropping by 47 million pounds ($75 million) as repayments slightly exceeded new lending.
Mortgage approvals are also still well below the levels seen in the boom running up to the 2008 financial crisis.
Bank of England Governor Mark Carney has promised to be "vigilant" about the risk of another house price bubble and has indicated a preference to use more intensive supervision of lending, rather than interest rates, as an initial response.
Unsecured consumer lending also rose modestly, with net new credit card lending of 175 million pounds slightly exceeding 99 million pounds in repayment of personal loans and overdrafts.
"These figures suggest that consumer confidence is growing. For the first time in four years, annual growth in household borrowing on credit cards and personal loans has turned positive," said David Dooks, the BBA's director of statistics.
The picture on business lending was more mixed, with net lending continuing to fall but at a more modest rate than earlier this year.
The BBA said that this was due to larger firms increasingly raising funds from sources other than banks, and added that lending to smaller firms - a source of concern for some politicians and the Bank of England - had stabilised.
Archer said he expected business lending to pick up as the economy strengthened.
"Stable lending to small and medium-sized companies in August fuels hopes that banks are now becoming more prepared to lend to businesses and that the FLS may be starting to have more of a positive impact," he said.
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